WTO approves Russia's membership after marathon

GENEVA/MOSCOW (Reuters) - Russia won admission to the World Trade Organisation on Friday after 18 years of negotiations, finally gaining full integration into the global economy two decades after the Soviet Union collapsed.

WTO Director general Pascal Lamy (R) gestures next to Elvira Nabiullina, Minister of Economic Development and Igor Shuvalov, Russia Deputy Prime Minster of Russia after the signature of the accession of the Russian Fedration as WTO member in Geneva December 16, 2011. REUTERS/Denis Balibouse

Russia’s $1.9 trillion economy was the largest outside the WTO, and accession will help reduce the dependence on energy exports that left it badly exposed to the oil price collapse of 2008.

Accession by Russia, with the second-largest nuclear arsenal after that of the United States, into a rules-based club should limit the danger of any repeat of regional conflicts like its 2008 war with Georgia.

Trade conflicts have repeatedly exacerbated tensions between Moscow and the South Caucasus state and the WTO could offer a forum to address disputes before they escalate.

“This result of long and complex talks is good both for Russia and for our future partners,” President Dmitry Medvedev said in a message to a WTO ministerial meeting in Geneva that formally approved Russia’s membership.

Russia now has six months to ratify its membership and could become the WTO’s 154th member 30 days later. Deputy Prime Minister Igor Shuvalov, who led entry talks, said it expected to do so after a presidential election next March.

“The latest will be May,” he told reporters on the sidelines of the WTO’s ministerial conference in Geneva, shortly after the WTO approved Russian accession. “We need some time and we would like that process to be supported by the people.”

Even by the standards of trade talks, Russia’s negotiations have been tortuous, suffering a series of reverses during the 12-year rule of Vladimir Putin, now prime minister and planning a return to the presidency, which he held from 2000-08.

Negotiations were close to a result in 2009 when Putin, frustrated at additional demands from existing members, launched a regional trade bloc with ex-Soviet republics Kazakhstan and Belarus that torpedoed the accession process.

Talks resumed in earnest only in late 2010 and achieved a critical breakthrough in October when Russia finalized terms with the United States and the European Union.

Agreement on a Swiss-brokered border monitoring deal for two Georgian regions that broke away after a brief Russian-Georgian war in August 2008 cleared the final stumbling block to a deal.

“I just happen to know a few things about marathons — the last mile is the worst, the toughest,” WTO head Pascal Lamy said at a two-hour ceremony. “The best moment in a marathon is where you cross the finishing line.”

INVESTMENT BENEFITS

China’s entry into the WTO a decade ago unleashed a decade of export-led growth but, with the global economic outlook darkening, Russia is unlikely to enjoy the same sort of uplift, experts say.

Oil, gas and metals account for four-fifths of Russia’s exports and, while bulging trade and current account surpluses have helped Moscow pay down debts and accumulate the world’s third-largest foreign reserves, they have also buoyed the ruble and made it hard for new industries to compete on world markets.

Growth could nonetheless benefit by 3.7 percent over the medium term and by 11 percent in the long run, according to a study for the World Bank by economist James Tarr, with consumers and service industries likely to be the biggest winners.

The real gains will come in the form of a more secure environment for foreign investors, who have long complained of corruption, insecure property rights and weak rule of law, while fast-growing Russian firms could expand more easily abroad.

WTO accession can also provide an anchor for economic reforms, opposed by entrenched domestic business interests, that are needed to wean the economy off its dependence on natural resources and promote investment-led growth.

Putin, with an eye to the concerns of powerful industrial oligarchs, has avoided publicly promoting the benefits of membership and, although ratification is assured, he still faces objections from a newly-invigorated opposition at home.

He has a tough path to the presidential election next March after the majority of his ruling United Russia party was slashed in a December 4 parliamentary election, and the opposition protested against alleged fraud in the vote.

“We have warned for the past five years of the risks of such an unacceptable step as joining the World Trade Organization,” said Vladimir Kashin, deputy leader of the opposition Communist party, which doubled its share of the vote to 20 percent.

The Communists argue that lowering trade barriers will hurt Russia’s agricultural sector and make it tough for manufacturers to compete — a claim rejected by Russian officials in Geneva.

The deal buys time for Russia’s fast growing auto sector, giving manufacturers seven years to prepare for a reduction of import tariffs in a country that is poised to become Europe’s largest car market.

Industries such as steel would benefit from recourse to WTO anti-dumping procedures. Economy Minister Elvira Nabiullina estimated that Russian industry could benefit by $2 billion a year from an end to discrimination against Russian exports.

CAPITOL CHALLENGE

Russia’s accession represents a success for the diplomatic ‘reset’ with Moscow launched by U.S. President Barack Obama but, for American business to benefit, Congress will need to repeal a key measure dating back to the Cold War.

“Russia’s accession is good for the United States, good for Russia, and good for the WTO,” U.S. Trade Representative Ron Kirk said in Geneva.

The Jackson-Vanik amendment, a 1974 provision linking trade to emigration rights for Soviet Jews, would have to be revoked for Washington to be able to apply so-called “permanent normal trade relations” to Russia.

Failure to do so would allow Russia to deny the United States preferential access to its markets in what would amount to an own-goal for U.S. businesses such as Pepsico or Alcoa that have already invested billions of dollars in Russia.

With Washington and Moscow exchanging reproaches over the conduct of Russia’s parliamentary vote, repealing Jackson-Vanik will be a challenge as Republicans, who control the House, gird for next year’s U.S. presidential election.

“Russia’s membership in the WTO marks an important milestone in its history, but there is hard work yet to be done on the American side,” said Edward Verona, head of the U.S.-Russia Business Council, a business lobby that backs Russian WTO entry.

“If Jackson-Vanik still applies to Russia once it accedes, then U.S. companies and farmers will be at a disadvantage to their global competitors and will not have access to the preferential trade regime negotiated over the last 18 years.”

Reporting by Tom Miles and Stephanie Nebehay in Geneva and Doug Palmer in Washington, Writing by Douglas Busvine